Report: More oil supplies may exist than thought

A recent analysis of global oil capacity by IHS Cambridge Energy Research Associates finds that overall petroleum supplies should grow though 2030, with no evidence of a peak of supply before then

A recent analysis of global oil capacity by IHS Cambridge Energy Research Associates finds that overall petroleum supplies should grow though 2030, with no evidence of a peak of supply before then.

In the group’s report, The Future of Global Oil Supply: Understanding the Building Blocks, global oil productive capacity is expected to grow to as much as 115 million barrels per day (bbl/d) through that period from the current level of 92 million bbl/d – a 25% increase.

Post-2030 supply could struggle to meet demand, noted HIS in its research, but this would take the form of a decades-long “undulating plateau” rather than a sharp fall.

“There is more than an adequate inventory of physical resources available to increase supply to meet anticipated levels of demand through 2030,” said Peter Jackson, IHS CERA senior director. “It would be easy to interpret the market and oil price trends from 2003 through 2009 in isolation to support the belief that a peak in global supply has passed or is imminent. But this only illustrates that the market continues to act as the shock absorber of major volatility.”

He added that 60% of the more than 1,000 fields examined in detail for IHS CERA’s oil supply study were found to have production levels that were either steady or climbing. When taking into account the production of these fields, the global aggregate decline rate of all fields currently in production is estimated to be 4.5%, Jackson noted.

“Supply evolution through 2030 is not a question of resource availability,” he added. “The crucial issue lies not below ground. It is the above-ground factors that will dictate the ultimate shape of the supply curve.”

One area of the world experiencing this oil supply jump is the U.S. According to the energy and commodity data firm Platts, U.S. crude oil production for 2009 is on target to have its biggest one-year jump since 1970, averaging 5.268 million bbl/d through October.

If that 5.268 million bbl/d figure holds through December, 2009 would show a 6.4% boost from the 4.95 million bbl/d average of 2008 and rank as the best U.S. oil production year since 2004, when output averaged 5.419 million bbl/d, according to Platts' analysis of data published by the U.S. Energy Information Administration (EIA).

Projections from the U.S. Minerals Management Service (MMS) indicate that the primary driver for this year’s U.S. oil production resurgence is the Gulf of Mexico, where operators have begun launching a group of new fields, fulfilling what has been a decade-long focus on unlocking the promise of deepwater exploration there, said Platts.

With the jump in the Gulf of Mexico, combined with the emergence of two other new oil-production trends, it appears the U.S. has a chance of at least maintaining oil output in the range of five million to six million bbl/d for some years to come, the firm said.

The Department of the Interior’s Minerals Management Service, for example, is proposing to lease 6,800 blocks covering more than 35.9-million acres of territory in the Gulf of Mexico off the coasts of Louisiana, Mississippi, and Alabama in March next year – an area that could result in production of up to 1.3 billion barrels of oil and 5.4 trillion cubic feet of natural gas.

“As we build a comprehensive energy strategy for our nation, we are moving ahead both with environmentally-responsible renewable energy development on public lands and appropriate oil and natural gas exploration and development onshore and offshore,” said Secretary of the Interior Ken Salazar. “Continued development in appropriate areas of the Outer Continental Shelf, such as in the areas we will offer in the Gulf of Mexico, is a key component of our efforts to reduce our country’s dependence on foreign oil.”

The peaking of global oil demand—rather than scale and deliverability of below-ground resources—could have a major impact on the flow of supply, according to IHS CERA’s analysis. “So much will happen between now and 2030 to affect demand, from changes in the automobile engine and the electric battery to changes in demographics and values,” Jackson added. “Peak demand may ultimately prove to be the main driver of long-term supply.”